Here’s a post I recently put up on the Fishburners Facebook Group that I thought would be good to repost here.
Keen to hear people’s thoughts.
Some really interesting data out of the US.
“Seed stage investments fell 64 percent in dollars and 41 percent in deals with $125 million invested into 41 deals in the first quarter.”
I suspect that the Series A crunch is finally playing out on earlier stage investors and there will be limited money going forward for mediocre companies.
This will likely be compounded by the hammering that tech stocks are getting ATM, which may make many early stage investors think that the IPO window is about to close as an exit path for some time.
This is, of course, completely irrational because of the lead time between IPO exit opps for investors and their seed stage investments which means that now is probably the time to start betting heavily to fill the pipeline for the next IPO exit cycle. But hey, who ever said early stage investors were rational.
The upside, however, is that if you’re a good company on a funding to growth path, the Series A crunch is going to be less of a problem for you from now on. More certainty of follow on funding will allow you to focus on growth (rather than operating income) – which, conventional wisdom tells us, is the path to that billion dollar outcome you’ve always wanted.
That is all predicated on you seeking US funding though. Aussie investors normally lag the US by 18-36 months, so I suspect we’re yet to see the peak of seed investment here in AU.
Considering the relatively small amount (compared to larger markets) of quality startups and what may very well be a large increase in the amount of seed funding available – the next 12-18 months may be the best time ever in terms of funding for Aussie startups.
Another reason to stay here for a bit longer?
Or maybe I’ve got it all wrong.”